Funda and tec

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Funda and tec

  1. 1. Technical analysis and fundamental analysis are the two main schools of thought in the financial markets. As we've mentioned, technical analysis looks at the price movement of a security and uses this data to predict its future price movements. Fundamental analysis, on the other hand, looks at economic factors, known as fundamentals. Let's get into the details of how these two approaches differ, the criticisms against technical analysis and how technical and fundamental analysis can be used together to analyze securities. Fundamental Analysis vs Technical Analysis The Differences Charts vs. Financial Statements At the most basic level, a technical analyst approaches a security from the charts, while a fundamental analyst starts with the financial statements. By looking at the balance sheet, cash flow statement and income statement, a fundamental analyst tries to determine a company's value. In financial terms, an analyst attempts to measure a company's intrinsic value. In this approach, investment decisions are fairly easy to make - if the price of a stock trades below its intrinsic value, it's a good investment. Although this is an oversimplification (fundamental analysis goes beyond just the financial statements) for the purposes of this tutorial, this simple tenet holds true. Technical traders, on the other hand, believe there is no reason to analyze a company's fundamentals because these are all accounted for in the stock's price. Technicians believe that all the information they need about a stock can be found in its charts. Time Horizon Fundamental analysis takes a relatively long-term approach to analyzing the market compared to technical analysis. While technical analysis can be used on a timeframe of weeks, days or even minutes, fundamental analysis often looks at data over a number of years.
  2. 2. The different timeframes that these two approaches use is a result of the nature of the investing style to which they each adhere. It can take a long time for a company's value to be reflected in the market, so when a fundamental analyst estimates intrinsic value, a gain is not realized until the stock's market price rises to its "correct" value. This type of investing is called value investing and assumes that the short-term market is wrong, but that the price of a particular stock will correct itself over the long run. This "long run" can represent a timeframe of as long as several years, in some cases. Furthermore, the numbers that a fundamentalist analyzes are only released over long periods of time. Financial statements are filed quarterly and changes in earnings per share don't emerge on a daily basis like price and volume information. Also remember that fundamentals are the actual characteristics of a business. New management can't implement sweeping changes overnight and it takes time to create new products, marketing campaigns, supply chains, etc. Part of the reason that fundamental analysts use a long-term timeframe, therefore, is because the data they use to analyze a stock is generated much more slowly than the price and volume data used by technical analysts. Trading Versus Investing Not only is technical analysis more short term in nature than fundamental analysis, but the goals of a purchase (or sale) of a stock are usually different for each approach. In general, technical analysis is used for a trade, whereas fundamental analysis is used to make an investment. Investors buy assets they believe can increase in value, while traders buy assets they believe they can sell to somebody else at a greater price. The line between a trade and an investment can be blurry, but it does characterize a difference between the two schools.
  3. 3. Comparison chart Definition: Data from: gathered Stock bought: Time horizon: Function: Concepts used: Example: Fundamental Analysis Technical Analysis Financial statements Charts Calculates stock value using economic factors, known as fundamentals. When price falls below intrinsic value Long-term approach Investing Return on Equity (ROE) and Return on Assets (ROA) iPhone Evaluation (http://aswathdamodara n.blogspot.com/2012/08/ apples-crown-jewelvaluing-iphone.html ) Uses price movement of security to predict future price movements When trader believes they can sell it on for a higher price Short-term approach Trade Dow Theory, Price Data AOL from November 2001 through August 2002 (http://en.wikipedia.org /wiki/Technical_analysi s#Prices_move_in_trend s)
  4. 4. The Critics Some critics see technical analysis as a form of black magic. Don't be surprised to see them question the validity of the discipline to the point where they mock its supporters. In fact, technical analysis has only recently begun to enjoy some mainstream credibility. While most analysts on Wall Street focus on the fundamental side, just about any major brokerage now employs technical analysts as well. Much of the criticism of technical analysis has its roots in academic theory specifically the efficient market hypothesis (EMH). This theory says that the market's price is always the correct one - any past trading information is already reflected in the price of the stock and, therefore, any analysis to find undervalued securities is useless. There are three versions of EMH. In the first, called weak form efficiency, all past price information is already included in the current price. According to weak form efficiency, technical analysis can't predict future movements because all past information has already been accounted for and, therefore, analyzing the stock's past price movements will provide no insight into its future movements. In the second, semi-strong form efficiency, fundamental analysis is also claimed to be of little use in finding investment opportunities. The third is strong form efficiency, which states that all information in the market is accounted for in a stock's price and neither technical nor fundamental analysis can provide investors with an edge. The vast majority of academics believe in at least the weak version of EMH, therefore, from their point of view, if technical analysis works, market efficiency will be called into question. There is no right answer as to who is correct. There are arguments to be made on both sides and, therefore, it's up to you to do the homework and determine your own philosophy.
  5. 5. Can They Co-Exist? Although technical analysis and fundamental analysis are seen by many as polar opposites - the oil and water of investing - many market participants have experienced great success by combining the two. For example, some fundamental analysts use technical analysis techniques to figure out the best time to enter into an undervalued security. Oftentimes, this situation occurs when the security is severely oversold. By timing entry into a security, the gains on the investment can be greatly improved. Alternatively, some technical traders might look at fundamentals to add strength to a technical signal. For example, if a sell signal is given through technical patterns and indicators, a technical trader might look to reaffirm his or her decision by looking at some key fundamental data. Oftentimes, having both the fundamentals and technicals on your side can provide the best-case scenario for a trade. While mixing some of the components of technical and fundamental analysis is not well received by the most devoted groups in each school, there are certainly benefits to at least understanding both schools of thought. AUTOMOBILE INDUSTRY IN INDIA The automotive industry in India is one of the larger markets in the world and had previously been one of the fastest growing globally, but is now seeing flat or negative growth rates.[1]India's passenger car and commercial vehicle manufacturing industry is the sixth largest in Automobile Industry in India the world, with an annual production of more than 3.9 million units in 2011.[2] According to recent reports, India overtook Brazil and became the sixth largest passenger vehicle producer in the world (beating such old and new auto makers as Belgium, United Kingdom, Italy, Canada, Mexico, Russia, Spain, France, Brazil), grew 16 to 18 per cent to sell around three million units in the course of 2011-12.[3] In 2009, India emerged as Asia's fourth largest exporter of passenger, behind Japan, South Korea, and Thailand.[4] In 2010, India beat Thailand to become Asia's third largest exporter of passenger cars. As of 2010, India is home to 40 million passenger vehicles. More than 3.7 million automotive vehicles were produced in India in 2010 (an increase of
  6. 6. 33.9%), making the country the second (after China) fastest growing automobile market in the world in that year.[5][6] According to the Society of Indian Automobile Manufacturers, annual vehicle sales are projected to increase to 4 million by 2015, no longer 5 million as previously projected. [1] The majority of India's car manufacturing industry is based around three clusters in the south, west and north. The southern cluster consisting of Chennai is the biggest with 35% of the revenue share. The western hub near Mumbai and Pune contributes to 33% of the market and the northern cluster around the National Capital Region contributes 32%.[7] Chennai, with the India operations of Ford, Hyundai, Renault, Mitsubishi, Nissan, BMW, Hindustan Motors, Daimler, Caparo, and PSA Peugeot Citroën is about to begin their operations by 2014. Chennai accounts for 60% of the country's automotive exports.[8] Gurgaon and Manesar in Haryana form the northern cluster where the country's largest car manufacturer, Maruti Suzuki, is based.The Chakan corridor near Pune, Maharashtra is the western cluster with companies like General, Volkswagen, Skoda, Mahindra and Mahindra, Tata Motors, Mercedes Benz, Land, Jaguar Cars, Fiat and Force Motors.having assembly plants in the area. Nashik has a major base of Mahindra & Mahindra with a UV assembly unit and an Engine assembly unit. Aurangabad with Audi, Skoda and Volkswagen also forms part of the western cluster. Another emerging cluster is in the state of Gujarat with manufacturing facility of General in Halol and further planned for Tata Nano at their plant in Sanand. Ford, Maruti Suzuki and Peugeot-Citroen plants are also set to come up in Gujarat. Kolkata with Hindustan, Noida with Honda and Bangalore with Toyota are some of the other automotive manufacturing regions around the country.
  7. 7. Introduction The Indian automotive industry has emerged as a 'sunrise sector' in the Indian economy. India is being deemed as one of the world's fastest growing passenger car markets and second largest two wheeler manufacturer. It is also home for the largest motor cycle manufacturer and the fifth largest commercial vehicle manufacturer. India is expected to become the third largest automobile market in the world. Ford is looking at India as a major export hub, as per Mr Joginder Singh, President and Managing Director, Ford India. By 2020, the luxury car segment is estimated to be around three per cent of the overall passenger car market in India. So, there is huge opportunity for growth. India is going to be one of the biggest markets for us, worldwide, according to Tomas Ernberg, Managing Director, Volvo Auto India. India is the largest base to export compact cars to Europe. Moreover, hybrid and electronic vehicles are new developments on the automobile canvas and India is one of the key markets for them. Global and Indian manufacturers are focussing their efforts to develop innovative products, technologies and supply chains. Key Statistics The amount of cumulative foreign direct investment (FDI) inflow into the automobile industry during April 2000 to November 2012 was worth US$ 7,518 million, amounting to 4 per cent of the total FDI inflows (in terms of US$), as per data published by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce. India's scooter and motorcycle manufacturers have registered 4 per cent growth during April-November 2012, according to the recent data released by the Society of Indian Automobile Manufacturers (SIAM). Moreover, the passenger vehicles segment grew at 9.71 per cent during April-June 2012, while overall commercial vehicle segment registered an expansion of 6.06 per cent year-on-year (y-o-y). The Indian small and light commercial vehicle segment is expected to more than double by 2015-16 and to grow at 18.5 per cent compound annual
  8. 8. growth rate (CAGR) for the next five years, according to a report titled, 'Strategic Assessment of Small and Light Commercial Vehicles Market in India' by Frost & Sullivan. Major Developments & Investments Volvo Group plans to invest Rs 3,800 crore (US$ 710.28 million) in India over the next few years. Of this, Rs 1,800 crore (US$ 336.45 million) would be invested in its joint venture (JV) with Eicher Motors. Volvo also aims to export about 30 per cent of the capacity at its Indian engine plant it plans to open in Pithampur, Madhya Pradesh in 2013, as it looks to leverage costs from India operations Honda Car India, the wholly-owned subsidiary of Honda Motor Co, plans to set up a greenfield diesel engine factory at its second industrial location in Rajasthan Jaguar Land Rover (JLR) will incur capital expenditure worth US$ 3.26 billion per year over the medium term mainly for product development, according to Crisil. In addition, Tata Motors has started assembling the Jaguar XF at its new facility in Chakan near Pune, Maharashtra The research and development (R&D) team of Fiat India will assist Chrysler to design and develop the smallest Jeep, to be launched globally by mid-2014. The Italian company has also commissioned an R&D set-up, Chrysler India Automotive Pvt Ltd, in Chennai Hero MotoCorp has started construction of its fourth manufacturing plant and a new Global Parts Centre (GPC) at Neemrana, Rajasthan. The project will attract an investment of Rs 550 crore (US$ 102.80 million)
  9. 9. and both facilities are expected to be operational by FY 2013-14 Mahindra & Mahindra (M&M) plans to invest US$ 900 million over the next four years in SsangYong Motor for developing three new vehicles and six engines. The investment would be from internal accruals, fresh equity and debt, as per Mr Pawan Goenka, President (Automotive & Farm Equipment sectors), M&M. The firm plans to buy Navistar's 49 per cent stake in the truck and engine making joint ventures (JV) - Mahindra Navistar Automotives Ltd and Mahindra Navistar Engines Pvt Ltd - for about US$ 31.95 million Luxury carmakers like BMW, Audi are planning more 'Made in India' products to increase the number of offerings in the sub Rs 2.5 million (US$ 46,729) category to expand market. The luxury carmakers are planning to tap the younger customers with lower price points VE Commercial Vehicles Ltd (VECV), a joint venture between Sweden's Volvo Group and homegrown Eicher Motors, will invest Rs 1,200 crore (US$ 224.30 million) by 2014 for expanding production capacity and developing new products Luxury car brands in India have registered a growth of 12.5 per cent during January-November 2012 period. The luxury car market in India is expected to reach 150,000 units by 2020, as per Mr Tomas Ernberg, Managing Director (MD), Volvo Auto India Government Initiatives The Government of India (GoI) plans to introduce fuel-efficiency ratings for automobiles to encourage sale of cars that consume less petrol or diesel, as per Mr Veerappa Moily, Union Minister for Petroleum and Natural Gas.
  10. 10. The GoI plans to push the supply of vehicles powered by electricity over the next eight years. It is expected that there will be a demand of 5-7 million electricity-operated vehicles by 2020. The GoI allows 100 per cent foreign direct investment (FDI) in the automotive industry through automatic route. The Automotive Mission Plan (AMP) 2006-2016 aims at doubling the contribution of automotive sector in gross domestic product (GDP) by taking the turnover to US$ 145 billion in 2016 with special emphasis on export of small cars, multi-utility vehicles (MUVs), two & three wheelers and auto components. Road Ahead The rapid improvement in infrastructure, huge domestic market, increasing purchasing power, established financial market and stable corporate governance framework have made the country a favourable destination for investment by global majors in the auto industry, as per Automotive Mission Plan (AMP) (2006-16). Additionally, the introduction of alternative fuels like hydrogen and bio fuels needs to be promoted to ensure sustainability of the industry over the long term. The vision of AMP 2006-2016 aims India "to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion accounting for more than 10 per cent of the GDP and providing additional employment to 25 million people by 2016." In addition, the US-based car major, Ford aims to make India its export hub and plans to sell its products in more than 50 countries over a period of time. The company has committed a total investment of US$ 2 billion in India so far (November 2012). The luxury car market of India is set for growth over the medium and long term, according to Mr Philipp Von Sahr, President, BMW Group India. The market is about 30,000 cars a year and is rising steadily, added Mr Sahr.
  11. 11. Exchange Rate Used: INR 1 = US$ 0.01870 as on January 22, 2013 References: Media Reports, Press Releases, Department of Industrial Policy and Promotion (DIPP), Society of Indian Automobile Manufacturers (SIAM) .
  12. 12. Top Automobile Companies in India Starting from the era when there was too slim of a variety of cars available in Indian market, Indian automobile industry has come up a long way to have a diverse array of cars these days. There are a number of top automobile companies running their operations in India, which again have a range of models in different segments of cars. However, while looking for top 10 automobile companies in India, one name that would always lead the list is Maruti Suzuki India. Maruti Suzuki has consistently been the dominant leader in the Indian automobile industry. However, there are also other big names like Tata Motors, Mahindra and Mahindra, Hyundai Motors, Hindustan Motors etc. During its early days, the most of the Indian car auto manufacturers banked upon foreign technologies. But the scenario has changed over the years and currently, the Indian auto manufacturers are using their own technology. Due to the growing pace of Indian automobile market, a number of car manufacturers including the global leaders have locked their horns in the Indian auto market. After the recent setback due to the global recession, the Indian automobile market has again started to grow up. Though the auto sales except commercial vehicles started creeping up since the beginning of this financial year, it's only the month of September 2009 when the market saw buoyant sales. It fuelled optimism in the industry. The retail trade also started soaring up. The auto sales saw a 9.6% rise in the month of September with a sale of 1,092,262 units. The passenger vehicle sales also grew by 20.32%. The two wheeler market was also augmented by 7.67% during the same period with a total sale of 838,150 units. The same trade is applicable for the three-wheeler market, which saw a growth of 13.51% (with sale of 41,137 units) during the same period.
  13. 13. List of Top Automobile Companies in India, 2011(Figures in ` Crores) 2011 ET Company 500 Rank Turnover PAT MCRP CR Assets 7 Tata Motors Ltd. 19 Maruti Suzuki India 38140.69 2382.37 31475.63 14762.9 Ltd. 21 41 46 67 101 110 148 396 Mahindra Mahindra Ltd. & 123222.91 9273.62 56499.77 52209.48 37026.37 3079.73 49945.17 36926.19 Hero MotoCorp Ltd. 19669.29 1927.9 40398.63 4447.22 Bajaj Auto Ltd. 17008.05 3454.89 46885.69 5154.96 Ashok Leyland Ltd. 11133.04 631.3 6653.15 Sundaram Clayton 7419.41 Ltd. 64.63 Eicher Motors Ltd. 243.12 4448.27 TVS Motor 6569.99 Company Ltd. Force Motors Ltd. 5138.64 1574.05 529.23 127.94 2985 58.62 730.05 6621.16 2428.87 1745.06 474.14 583.79
  14. 14. Tata Motors Tata Motors is the largest automobile company of Asia headquartered in Mumbai, India. Annual Projected revenue for 2010-11 is US$ 27.629 billion. It also occupies the number one position in commercial car segment. Tata Motors enjoys 31.2% of market share in the multi-utility vehicles, which in luxury car segment, it has 6.4% market share. Most of the Tata Motors' vehicles are sold predominantly in India and over 4 million vehicles have been produced domestically within India. Tata sold 52,531 units of vehicles during September 2009, comparing to 49,647 units during September 2008 (a growth of 6%). In domestic market, Tata Motors sold 49,650 units during the same period, comparing to 45,234 units in September 2008. Maruti Suzuki India Limited (MSIL) Maruti Suzuki India is an undisputed leader in the Indian automobile industry. Started its journey in February 1981 as Maurti Udyog Limited, the company created history in the Indian automobile market with its hugely popular fourwheeler model Maruti 800. The company became the first Indian automobile company to manufacture one million vehicles in 1994. The company became Maruti Suzuki India Limited on September 17, 2007. Maruti's average revenue for the year ending 2010-11 is US$7.13 billion. Maruti sold 83,306 units of vehicles in September 2009, comparing to 71,000 units in the same month in the previous year (with a growth rate of 17.3%). It also exported 11,712 units during September 2009, comparing to 6,318 units in the same month in the previous year (with a growth rate of 85.4%).
  15. 15. Hyundai Motor India Limited (HMIL) Hyundai Motor India Limited, founded in 1998 and a subsidiary of Korean auto giant Hyundai Motor Company, is the second largest car manufacturer in India. It is also country's largest passenger car exporter. Hyundai Motor came very close to the hearts of the Indian auto lovers through its flagship model Santro. After the recession, Hyundai Motor saw a growth rate of 25% in the domestic market. During September 2009, HMIL sold 53,804 units, comparing to 46,218 units during September 2008. In the domestic market, it sold 27,803 units in September 2009, comparing to 22,311 during September 2008. The overseas sales during the same period also grew up 9% as it sold 26,001 units in September 2009, comparing to 23,907 units during the same month in the previous year. Mahindra & Mahindra Limited (M&M) Mahindra &Mahindra Limited is another auto-giant in India. A part of the Mahindra Group, M&M is the largest SUV maker in the country. In September 2009, M&M registered a domestic sale of record 26,921 units, comparing to 22,729 units in September 2008 (with an increase of 18.4%). On the other hand, it sold 15,296 units of UV in the same period comparing to 10,641 units in September 2008 (with a whooping growth of 43.7%). General Motors India Private Limited (GM India) General Motors India Private Limited is another top player in Indian automobile industry. A wholly-owned subsidiary of the auto giant General Motors, GM India saw a Y-o-Y sales growth of 49% in September 2009 with a sale of 7,654 units, comparing to 5,154 units in September 2008. Hero MotoCorp Limited In 2010, When Honda decided to move out of the joint venture, Hero Group bought the shares held by Honda. Subsequently, in August 2011 the company was renamed Hero MotoCorp with a new corporate identity. Hero Honda Motors Limited, the joint venture between Hero Group and
  16. 16. Honda, was the biggest two-wheeler manufacturers in the world. It shook the Indian two-wheeler market with its famous model Hero Honda Splendor, which became the largest selling motorcycle in the world. It consistently sold more than 1 million units of Splendors every year. In 2008-09, Hero Honda sold about 3.28 million bikes and registered a net profit of ` 1281.7 crore. It sold 4,01,290 units of two-wheeler in September 2009, comparing to 3,85,262 in September 2008. It already sold 11,83,235 units of two-wheelers in Q2 of FY10 with a growth rate of 21.7% against the corresponding period of the previous year. Bajaj Auto Bajaj Auto is the second largest two-wheeler manufacturer in India. It is also the fourth largest two and three-wheeler maker in the world. In September 2009, Bajaj Auto sold 249,795 units of two-wheelers, comparing to 218,494 units in September 2008 (with a growth rate of 14.3%). During September 2009, it also registered a growth of 12.4% in the domestic two-wheeler sales and 19.9% in two-wheeler export. Honda Siel Cars India Limited (HSCI) Honda Siel Cars India Limited, a joint venture between the Japanese auto giant Honda Motor Company Limited and the Indian company Siel Limited, started its operation in December 1995. In September 2009, HSCI sold 5,794 units, comparing to 3,104 units in September 2008 (with a growth rate of 86.7%). Toyota Kirloskar Motor Private Limited (TKM) Toyota Kirloskar Motor Private Limited is another top Indian automobile company. A joint venture between the Japanese auto giant Toyota Motor Corporation and Kirloskar Group, TKM has a number of car models including Innova, Corolla, Fortuner, Camry and the Land Cruiser Prado. It sold 7,657 units in December 2009. Hindustan Motors Hindustan Motors is another top automobile company in India. It was once country's largest car manufacturer before Maruti Udyog overpowered it. Its popular model 'Ambassador' has been extensively used as government limousine as well as taxi cab in India.

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